Defence Innovation Organistaion (DIO) is to be launched as a non-profit company later this month to foster technology development and innovative products with commercial potential for the defence sector, informed sources said.

The company is being formed by defence electronics major Bharat Electronics Limited (BEL) and defence aviation major Hindustan Aeronautics Limited(HAL).

The Defence Ministry had in December approved the creation of a Defence Innovation Fund (DIF) under which the DIO is being formed.

"This was a Ministry of Defence initiative and was tasked to BEL and HAL. The new entity will work under the guidance of the ministry which will provide the ideas and topics for innovation," a BEL source told.

The company will fund development of new and innovative products and solutions for India's defence requirements.

"Anyone from academia, medium and small enterprises, research and development institutes, individuals and start ups can approach DIO for funding," source said.

"BEL and HAL are contributing Rs 5 crore each to Defence Innovation Organisation, a Section 8 company, to promote innovation in defence. The company will be launched within this month," the source said.

As per the Section 8 of the Indian Companies Act, 2013, not-for-profit companies can be established for promotion of art, culture, science et al.

After the launch, DIO will choose a knowledge partner for screening the ideas received for funding support.

The selected ideas will be financially supported to work on the proof of concept and those will go through further down selection process to select concepts that can be funded for prototype development.

The successful prototypes will also be helped in their commercialisation.

"If we get good response then the fund can go up to Rs 100 crore, with Rs 50 crore each from both the partners," source added.

The process of the registration of the company is in final stages.

According to sources, the company's board will initially have two nominated directors, one each from the HAL and BEL. The process of selection of the nominee directors is underway.

The DIO, in future, may also have some independent directors.